Good news, retailers: Canadians are feeling a little better about their household financial outlook.
Oh wait, maybe not good news. Turns out they still don't think it's a good time to make major purchases.
That's the message from this month's consumer confidence survey by the Conference Board of Canada, and it seems to dovetail with the actual state of retail sales in Canada
Sales have "flatlined" so far this year and seem poised to continue in the same vein, says economist Emanuella Enenajor at CIBC World Markets. "We're not bullish," she sums up.
Still, things could be worse. We could live in the U.S. or Europe.
One of the key factors depressing the spending plans of Canadians, even as the consumer confidence survey showed them a bit more optimistic about future income and job growth prospects, seems to be that things look so scary in the rest of the world, said Conference Board economist Todd Crawford.
Canada might be a relative island of stability as Europe sinks into a double-dip recession and the U.S. descends into another year of bitter, economically harmful political wrangling, but Canadians understand that we can't prosper for long if our export markets don't stage a reasonable recovery.
As well, more than a year of finger-wagging speeches about elevated consumer indebtedness from top federal officials seem to be sinking in, said both Crawford and Douglas Porter, deputy chief economist at BMO Capital Markets.
The fact is that household debt levels are unusually high, thanks mostly to the higher prices homebuyers must finance in a strong real estate market. But that trend is slowing sharply, with credit growth now barely making headway.
And it's not just the burden of debt. Shoppers are also held back by slow income gains and rising taxes in provinces like Quebec.
Looking forward, economists see a real possibility of slowing job growth as headwinds from many quarters slow Canada's economy. That, of course, would put further pressure on the incomes that fuel retail sales.
Already, governments are cutting back on spending and the outlook for residential construction has gone from boosting growth to neutral at best, Porter says.
He sees the employment outlook as subdued, falling from a recent average of about 26,000 new jobs a month to something near 10,000 in the coming months.
Enenajor is slightly more upbeat, but doesn't discount the possibility that job growth could disappoint in the year's second half. As well, she thinks there's a chance that worried consumers will intensify their debt diet, further reducing their spending.
Porter sees broadly the same picture. He believes spending on autos and gasoline are headed for a mild downtrend through the rest of this year, helped along by lower oil prices in the case of gas and lower willingness to tap credit lines in the case of cars.
On the other hand, he and Enenajor both caution against jumping to the conclusion that consumer spending is going to fall off a cliff. It will be sluggish, but it will probably continue to expand.
For one thing, retail spending outside of autos and gas will likely show some growth, Porter says.
For another, about half of all consumer spending is on stuff other than retail merchandise: everything from rent to haircuts. Such spending on services, which tends to grow fairly consistently, will be a source of support for the economy.
But for the part of the economy made up of retail outlets, times promise to be a little challenging.
Not only is there the underwhelming tone of Canadian economic expansion, but there's also a chance that cross-border shopping could prove to be more of a competitive issue than in past years.
Porter notes that many Canadian retailers still charge significantly more than their U.S. counterparts, even with the dollar hovering around parity. Now the temptation to load up on U.S. bargains has just increased with a newly enriched duty-free limit of up to $800 after a 48-hour trip.
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